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Jyothy Labs buying back stake in laundry business from IL&FS PE, looks to raise over $100M

23 October, 2013

Fast moving consumer goods (FMCG) firm Jyothy Laboratories Ltd is buying back stake in its laundry business Jyothy Fabricare Services Ltd from IL&FS Private Equity for an undisclosed amount.

Its board has approved acquisition of 3.3 million Compulsorily Convertible Cumulative Participatory Preference Shares (CCCPPS) of Rs 10 each (representing 100 per cent of preference capital) and 50,000 equity shares (0.38 per cent of equity capital) in Jyothy Fabricare held by IL&FS PE. The company presently holds 74.71 per cent in Jyothy Fabricare.

In 2010, Jyothy Fabricare had raised Rs 100 crore in capital through private equity funding from IL&FS PE for a business valuation of Rs 400 crore. The investors were issued CCCPPS to be converted into equity shares based on the financials to be achieved in the FY14.

This stake is being purchased from the investor, which would make it a wholly owned arm of the public listed firm.

According to the company’s annual report, during the financial year 2012-13, Jyothy Fabricare focused on rationalising and improving financial efficiency in its operations at all levels after its expansion drive in previous financial year 2011-12.

As a result, loss before interest, tax and depreciation & amortisation reduced 28.24 per cent at the consolidated level and Jyothy Fabricare recorded a total consolidated turnover of Rs 44.28 crore, up 16.5 per cent in FY13. For financial year 2013-14, Jyothy Fabricare has plans to enhance focus on retail segment; aligning the institutional & railway business and also concentrate to further increase volumes of the BOOT project and thereby improve profitability.

Jyothy Laboratories is known for brands like Ujala (fabricare), Maxo (household insecticides) and Exo (dishwashing). The company has around 28 manufacturing facilities located in 16 locations across India.

Funding

Simultaneously, the company’s board approved fresh funding through a mix of preferential allotment to promoters and debentures.

The firm is looking to raise around Rs 400 crore ($65 million) through issue of non-convertible debentures to replace the existing borrowings, the company informed the BSE in a disclosure.

Two years ago it acquired Henkel’s India business, a deal which elevated Jyothy Laboratories to the top league of FMCG players in India. It raised Rs 550 crore as debt through a five-year loan from Axis Bank to refinance part of the debt it incurred to buy the majority stake in Henkel India.

Subject to approvals, it would also issue of 15 million shares to the promoters through a preferential allotment. Based on the last traded price of the stock, it may scoop as much as Rs 285 crore ($46 million) through this issue.

Jyothy Laboratories scrip rose 6.5 per cent to close at Rs 189.75 a share on the BSE in a flat Mumbai market on Tuesday.

The promoters led by MP Ramachandran held 63.69 per cent stake in the firm as of September 30, 2013. The proposed preferential allotment would hike their holding to 66.7 per cent.

The company closed FY13 with revenues of Rs 1,106 crore but net profit more than halved partly due to higher interest costs. A refinance of debt will boost earnings.

In an interaction at a VCCircle event early this year, the company’s top management had shared that the firm is looking to triple its size in three years.

(Edited by Joby Puthuparampil Johnson)


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Jyothy Labs buying back stake in laundry business from IL&FS PE, looks to raise over $100M

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